Three Common Scams to Avoid During Tax Season

By Michael Siino  |  March 6, 2019

As we are now deep in the heart of tax filing season, and taxpayers are anxious to determine how the new and “simplified” (I say while chuckling) tax code will affect them, it is once again wise to remind ourselves to stay vigilant so we do not fall prey to the one thing that is as certain as death and taxes: the persistent threat of tax scams.

 With that in mind, let’s review three prevalent tax scams – next week, we’ll take a look at another three.

1.) Phone Scams: We all know someone (perhaps ourselves) who has received a threatening call from someone claiming to be the IRS (or a collection agency acting on behalf of the IRS) in an attempt to collect on an unpaid tax balance. These callers threaten to freeze your accounts, charge outlandish penalties or promise other misfortune if you do not immediately give them your banking, credit card or other private information. Do not fall victim to these threats.

It is important to remember the following:

                          ▪   The IRS will not request personal or financial information over the phone, nor
                              will they rely on angry “shake-down” calls. 

                          ▪   The IRS will never call to demand immediate payment nor to discuss taxes owed
                              without having first mailed you a bill. They do not demand payment without giving
                              you the ability to appeal the assessment.

                          ▪   The IRS will not demand that you pay by any specific payment method
                              (such as a debit card) nor will they ask for a credit card number over the phone.

                          ▪   The IRS will not threaten to have you arrested for not paying.

Only divulge private information over the phone if you initiated the call and are sure you are dealing with an IRS representative.

2.) Preparer Fraud: Beware of preparers who are willing to overstep the rules to get you a larger refund. As the signer of those returns, you are responsible for any errors and may be assessed interest and penalties accordingly. Confirm that all income is included, and deductions are not padded or exaggerated. Be diligent and only use tax preparers with high integrity who are honest and worthy of your trust.

It is especially important to beware of false tax preparers, whose sole aim is to gain access to your personal information and account numbers to file false returns and claim refunds on your behalf.

3.) Offshore Tax Avoidance: Be aware of any tax schemes or strategies that aim to hide your money in foreign accounts in an attempt to avoid paying tax on these funds. The IRS will assess severe penalties if they discover you are doing this. Consider using the Offshore Voluntary Disclosure Program if you find yourself in these situations. In addition to risking penalties from the IRS, you may be putting your money at risk by transferring it to offshore funds designed to hide your money from both the IRS and from you.

The best advice in all of these possible situations is to remain cautious and understand that every threatening call is not in fact a real threat. Be aware of the standard operating procedures by which the IRS initiates contact, assesses and collects on balances owed. And when it comes to tax strategies, only accept advice from a trusted advisor.

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About Michael Siino

Michael Siino, CPA, is the Co-Partner-in-Charge of the Real Estate Group at Marks Paneth LLP. With over 30 years of public accounting experience, Mr. Siino primarily concentrates on the real estate industry, where he serves commercial and residential real estate clients, real estate management companies as well as co-ops, condominiums, retirement plans and trusts. He also advises high-net-worth individuals and family partnerships. Mr. Siino advises his clients on all facets of accounting and tax issues,... READ MORE +

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